Preamble

An Act to provide for regulation of credit information companies and to facilitate efficient distribution of credit and for matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Fifty-sixth Year of the Republic of India as follows:--

Chapter I

Section 1. Short Title, Extent and Commencement

(1) This Act may be called the Credit Information Companies (Regulation) Act, 2005.

(2) It extends to the whole of India.

(3)1It shall come into force on such date as the Central Government

may, by notification in the Official Gazette, appoint:

Provided that different dates may be appointed for different provisions of this Act, and any reference in any such provision to the commencement of this Act shall be construed as a reference to the coming into force of that provision.

1. The enforcement date for the Act as per notofication No: SO2098(E) is 14.12.2006.

Section 2. Definitions

In this Act, unless the context otherwise requires,--

(a) "board" means the Board of directors of a credit information company;

(b) "borrower" means any person who has been granted loan or any other credit facility by a credit institution and includes a client of a credit institution;

(c) "client" includes--

(i) a guarantor or a person who proposes to give guarantee or security for a borrower of a credit institution; or

(ii) a person--

(A) who has obtained or seeks to obtain financial assistance from a credit institution, by way of loans, advances, hire purchase, leasing facility, letter of credit, guarantee facility, venture capital assistance or by way of credit cards or in any other form or manner;

(B) who has raised or seeks to raise money by issue of security as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956(42 of 1956), or by issue of commercial paper, depository receipt or any other instrument;

(C) whose financial standing has been assessed or is proposed to be assessed by a credit institution or any other person or institution as may, by notification, be directed by the Reserve Bank;

(d) "credit information" means any information relating to--

(i) the amounts and the nature of loans or advances, amounts outstanding under credit cards and other credit facilities granted or to be granted, by a credit institution to any borrower;

(ii) the nature of security taken or proposed to be taken by a credit institution from any borrower for credit . facilities granted or proposed to be granted to him;

(iii) the guarantee furnished or any other non-fund based facility granted or proposed to be granted by a credit institution for any of its borrowers;

(iv) the credit worthiness of any borrower of a credit institution;

(v) any other matter which the Reserve Bank may, consider necessary for inclusion in the credit information to be collected and maintained by credit information companies, and, specify, by notification, in this behalf;

(e) "credit information company" means a company formed and registered under the Companies Act, 1956(1 of 1956) and which has been granted a certificate of registration under sub-section (2) of section 5;

(f) "credit institution" means a banking company and includes--

(i) a corresponding new bank, the State Bank of India, a subsidiary bank, a co-operative bank, the National Bank and regional rural bank;

(ii) a non-banking financial company as defined under clause (f) of section 45-I of the Reserve Bank of India Act, 1934(2 of 1934);

(iii) a public financial institution referred to in section 4A of the Companies Act, 1956(1 of 1956);

(iv) the financial corporation established by a State under section 3 of the State Financial Corporation Act, 1951(63 of 1951);

(v) the housing finance institution referred to in clause (d) of section 2 of the National Housing Bank Act, 1987(53 of 1987);

(vi) the companies engaged in the business of credit cards and other similar cards and companies dealing with distribution of credit in any other manner;

(vii) any other institution which the Reserve Bank may specify, from time to time, for the purposes of this clause;

(g) "credit scoring" means a system which enables a credit institution to assess the credit worthiness and capacity of a borrower to repay his loan and advances and discharge his other obligations in respect of credit facility availed or to be availed by him;

(h) "notification" means a notification published in the Official Gazette of India;

(i) "prescribed" means prescribed by rules made under this Act;

(j) "regulations" means regulations made by the Reserve Bank under this Act;

(l) "specified user" means any credit institution, credit information company being a member under sub-section (3) of section 15, and includes such other person or institution as may be specified by regulations made, from time to time, by the Reserve Bank for the purpose of obtaining credit information from a credit information company;

(m) words and expressions used herein and not defined in this Act but defined in the Reserve Bank of India Act, 1934(2 of 1934) or the Banking Regulation Act, 1949(10 of 1949) or the Companies Act, 1956(1 of 1956) shall have the meanings respectively assigned to them in those Acts.

Chapter II

Section 3. Prohibition to commence or carry on business of credit information

Save as otherwise provided in this Act, no company shall commence or carry on the business of credit information without obtaining a certificate of registration from the Reserve Bank under this Act.

Section 4. Application of Registration

(1) Every company which intends to commence the business of credit information shall make an application for registration to the Reserve Bank in such form and manner as may be specified by regulations.

(2) Every credit information company, in existence on the commencement of this Act, before the expiry of six months from such commencement, shall apply in writing to the Reserve Bank for obtaining a certificate of registration under this Act:

Provided that in the case of a credit information company in existence on the commencement of this Act, nothing in section 3 shall be deemed to prohibit such credit information company from carrying on the business of a credit information company, until it is granted a certificate of registration or is by notice in writing informed by the Reserve Bank that a certificate of registration cannot be granted to it.

Section 5. Grant of Certificate of Registration

(1) The Reserve Bank may, for the purpose of considering the application of a company for grant of a certificate of registration to commence or carry on the business of credit information, require to be satisfied, by an inspection of records or books of such company or otherwise that the following conditions are fulfilled, namely:--

(a) that the applicant company has minimum capital structure referred to in section 8;

(b) that the general character of the management or the proposed management of the applicant company shall not be prejudicial to the interest of its specified users, clients or borrowers, or other credit information companies;

(c) that any other condition, the fulfilment of which in the opinion of the Reserve Bank, shall be necessary to ensure that the commencement or carrying on of the business of credit information by the applicant company shall not be detrimental or prejudicial to the public interest or banking policy or credit system or its specified users or clients or borrowers or other credit information companies or others who would provide credit information to the credit information companies.

(2) The Reserve Bank may, after being satisfied that the conditions as referred to in sub-section (1) are fulfilled, grant a certificate of registration to the applicant company to commence or carry on the business of credit information, subject to such conditions which it may consider fit to impose and if the company fails to fulfil any of such conditions or any of the provisions of this Act, the application of the company shall be rejected:

Provided that no application shall be rejected unless the applicant has been given an opportunity of being heard.

(3) The Reserve Bank may, having regard to the available business of credit information, the potential and scope for expansion of existing credit information companies and other relevant factors, determine the total number of the credit information companies which may be granted the certificates of registration for carrying on the business of credit information:

Provided that the total number of such credit information companies so determined may, on being satisfied by the Reserve Bank, that there is change in available business of credit information, potential and scope for expansion of existing credit information companies and other relevant factors relating thereto, be reviewed by the Reserve Bank.

Section 6. Power of Reserve Bank to Cancel Certificate of Registration

(1) The Reserve Bank may cancel a certificate of registration granted to a credit information company under sub-section (2) of section 5 if such company,--

(i) ceases to carry on the business of credit information; or

(ii) has failed to comply with any of the conditions subject to which the certificate of registration has been granted to it; or

(iii) at any time fails to fulfil any of the conditions referred to in sub-clauses (a) to (c) of sub-section (1) or sub-section (2) of section 5; or

(iv) fails--

(a) to comply with the provisions of any law for the time being in force or any direction issued by the Reserve Bank under the provisions of this Act; or

(b) to submit or offer for inspection its books of account and other relevant documents when so demanded by the officers, persons or agency referred to in sub-section (1) of section 12.

(2) Before cancelling the certificate of registration granted to a credit information company under this section on the ground that the company has failed to comply with the conditions specified in clauses (a) to (c) of sub-section (1) or sub-section (2) of section 5 or the provisions of any other law for the time being in force or directions issued under this Act, the Reserve Bank, shall grant time to such company on such terms as the Reserve Bank may deem appropriate for taking necessary steps to comply with such directions or provisions or fulfilment of such conditions, within such time:

Provided that if the Reserve Bank is of the opinion that the delay in cancelling the certificate of registration of such company shall be prejudicial or detrimental to the public interest or banking policy or credit system or borrowers or other credit information companies, the Reserve Bank may cancel the certificate of registration without granting time as provided in sub-section (2).

(3) No order of cancellation of certificate of registration, granted to a credit information company, shall be made by the Reserve Bank unless such company has been given a reasonable opportunity of being heard.

Section 7. Appeal Against order of Reserve Bank

(1) A credit information company aggrieved by the order of rejection of an application for grant of certificate of registration under section 5 or cancellation of certificate ( of registration under section 6, may prefer an appeal to the Central Government or any other authority or tribunal which may be designated by rules made by the Central Government, within a period of thirty days from the date on which such order of rejection or cancellation, as the case may be, is communicated to the credit information company.

(2) The decision of the Central Government or the authority or tribunal referred to in sub-section (1) where an appeal has been preferred to it under sub-section (1), or of these Reserve Bank where no such appeal has been preferred, shall be final:

Provided that before making any order of rejection of an appeal, the applicant company or the credit information company, as the case may be, shall be given a reasonable opportunity of being heard.

Section 8. Requirement as to Minimum Capital

(1) The authorised capital of every credit information company shall be a minimum of thirty crores:

Provided that the Reserve Bank may, by notification, increase the minimum amount of authorised capital to any amount not exceeding fifty crores.

(2) The issued capital of every credit information company shall not be less than twenty crores:

Provided that the Reserve Bank may, by notification, increase the issued capital to any amount not exceeding the minimum amount of authorised capital as referred to in sub-section (1).

(3) The minimum paid up capital of every credit information company at any time shall not be less than seventy five per cent. of the issued capital.

Chapter III

Section 9. Management of Credit Information Company

(1)Notwithstanding anything contained in any law for the time being in force, or inany contract to the contrary, every credit information company in existence onthe commencement of this Act, or which comes into existence thereafter, shallhave one of its directors, who may be appointed on whole-time or on a part-timebasis as chairperson of its board, and where he is appointed on whole-time basisas chairperson of its board, he shall be entrusted with the management of thewhole of the affairs of the credit information company:

Providedthat the chairperson of the board of the credit information company shallexercise his powers subject to the superintendence, control and directions ofthe board.

(2)Where a chairperson is appointed on a part-time basis, the management of wholeof the affairs of the credit information company shall be entrusted to amanaging director or, a whole-time director by whatever name called, who shallexercise his powers subject to the superintendence, control and directions ofthe board.

(3)In addition to the chairperson or managing director or whole-timedirector, by whatever name called, the board of directors shall consist of notless than fifty per cent. directors who shall be persons having specialknowledge in, or practical experience of, the matters relating to publicadministration, law, banking, finance, accountancy, management or informationtechnology.

(4)In discharging its functions, the board shall act on business principlesand shall have due regard to the interest of its specified users, creditinstitutions or the clients or borrowers of credit institutions.

(5)Where the Reserve Bank is satisfied that it is in the public interest or in theinterest of banking policy or credit system of the country, or for preventingthe affairs of any credit information company being managed in a mannerdetrimental to the interest of banking policy or credit institutions orborrowers or clients or for securing the proper management of any creditinformation company, it is necessary so to do, the Reserve Bank may, for reasonsto be recorded in writing, by order published in the Official Gazette, supersedethe board of such company, for such period not exceeding six months, as may bespecified in the order and which may be extended from time to time, so, however,that the total period shall not exceed twelve months:

Providedthat before making any such order, the Reserve Bank shall give a reasonableopportunity to the board of such credit information company to makerepresentation against the proposed supersession and shall consider therepresentation, if any, of the board.

(6)The Reserve Bank may, on supersession of the board of a creditinformation company under sub-section (5), appoint an Administrator for suchperiod and on such salary and other terms and conditions as it may determine.

(7)The Reserve Bank may issue such directions to the Administrator as it may deemappropriate and the Administrator shall be bound to follow such directions.

(8)Upon making of the order under sub-section (5), superseding the board ofa credit information company--

(a)the chairperson, managingdirector and other directors of such credit information company shall, as fromthe date of supersession, vacate their offices as such;

(b)all the powers, functions andduties which may, by or under the provisions of the Companies Act, 1956 or thisAct or any other law for the time being in force, be exercised or discharged, byor on behalf of the board of such credit information company, or by a resolutionpassed in general meeting of that company, shall, until the reconstitution ofits board under sub-section (10), be exercised and discharged by the Administrator appointed bythe Reserve Bank under sub-section (6):

Providedthat the powers exercised by the Administrator shall be valid notwithstandingthat such powers are exercisable by a resolution passed in the general meetingof such credit information company.

(9)The salary and allowances payable to the Administrator and staffassisting the Administrator shall be borne by the credit information company.

(10)On and before the expiration of two months before expiry of the period ofsupersession mentioned in the Order of the Reserve Bank issued under sub-section(5), the Administrator of the credit information company, shall call a generalmeeting of the credit information company to elect new directors andreconstitute its board and any person who had vacated his office under clause (a)of sub-section (8),shall not be deemed to be disqualified for re-appointment.

(11)Notwithstanding anything contained in any law for the time being in forceor in any contract or the memorandum or articles of association, of the creditinformation company, on the removal of a person from office under this section,that person shall not be entitled to claim any compensation for the loss ortermination of office.

Section 10. Power of Reserve Bank to Determine Policy

Where the Reserve, Bank is satisfied that it is necessary or expedient in the public interest or in the interest of specified users or in the interest of credit information companies or credit institutions or clients or borrowers so to do, it may determine the policy in relation to functioning of credit information companies or credit institutions or specified users generally or in particular and when the policy has been so determined all credit information companies, credit institutions and specified users, as the case may be, shall be bound to follow the policy as so determined.

Section 11. Power of Reserve Bank to Give Directions

(1) Where the Reserve Bank is satisfied that,--

(a) in the public interest; or

(b) in the interest of credit institutions; or

(c) in the interest of specified users; or

(d) in the interest of banking policy; or

(e) to prevent the affairs of any credit information company being conducted in a manner detrimental to the interests of its specified users or in a manner prejudicial to the interests of credit institutions or borrowers or clients; or

it is necessary to issue directions to credit information companies or credit institutions or specified users generally or to any credit information company or credit institution or specified user in particular, it may, from time to time, issue such directions as it deems fit, and such credit information companies, credit institutions and specified users or credit information company, credit institution, and specified user, as the case may be, shall be bound to comply with such directions.

(2) The Reserve Bank may, on representation made to it or on its own motion, modify or cancel any direction issued under sub-section (1), and the Reserve Bank, in so modifying or cancelling any direction, may impose such conditions as it thinks fit, subject to which the modification or cancellation shall have effect.

(3) The Reserve Bank may, at any time, if it is satisfied that in the public interest or in the interest of a credit information company or its members, it is necessary so to do, by order in writing and on such terms and conditions as may be specified therein,--

(a) require such credit information company to call a meeting of its directors for the purpose of considering any matter relating to or arising out of the affairs of the credit information company;

(b) depute one or more of its officers to watch the proceedings at any meeting of the board of the credit information company or of any committee or of any other body constituted by it and require the credit information company to give an opportunity to the officers so deputed to be heard at such meetings and also require such officers to send a report of such proceedings to the Reserve Bank;

(c) require the board of the credit information company or of any committee or any other body constituted by it to give in writing to any officer deputed by the Reserve Bank in this behalf at his usual address all notices of, and other communications relating to, any meeting of the board, committee or other body constituted by it;

(d) appoint one or more of its officers to observe the manner in which the affairs of the credit information company or of its offices or branches are being conducted and make a report thereon;

(e) require the credit information company to make, within such time as may be specified in the order, such changes in the management as the Reserve Bank may consider necessary.

(4) The Reserve Bank may, at any time, direct any credit information company to furnish it within such time as may be specified by the Reserve Bank, such statements and information relating to the business or affairs of the credit information company as the Reserve Bank may consider necessary or expedient to obtain for the purpose of this Act.